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Chairman, South Barrackpore Municipality v. Amulya Nath Chatterjee

Calcutta High Court

Aug 2, 1907

Judgment

Subsequent
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Factual and Procedural Background

This appeal arises from a suit brought by the South Barrackpore Municipality against Amulya Nath Chatterjee to set aside a "permanent maurasi mokurrari" lease dated 22 March 1902 in respect of 35 bighas, 15 cottahs of land. Under the lease the Municipality was to pay a salami of Rs. 357-8 annas to the defendant and rent at the rate of one rupee per bigha per month (the court calculated one year's rent for the acreage as Rs. 429). The Subordinate Judge, Second Court, Alipore dismissed the Municipality's suit by a decision dated 13 June 1905. The Municipality appealed from that decision.

Legal Issues Presented

Whether the lease entered into by the Municipality with the defendant was ultra vires (beyond the powers of the Municipality).
Whether the lease binds only the executing persons and not the rate-payers (i.e., whether it binds the Municipal Commissioners representing rate-payers).
Whether the contract was entered into in fraud of the Bengal Municipal Act.
Whether the lease was duly executed in accordance with the provisions of the Municipal Act (the opinion refers to "Section 87" and subsequently discusses the requirements set out in what it describes as Section 37).
Whether the lease was illegal because the Commissioners had no power to enter into it without budgeting for the expenditure and obtaining sanction of higher authorities.
Whether the defendant had only a temporary/occupancy right and therefore lacked power to convey a permanent right to the Municipality.
Whether the higher authorities refused to sanction the expenses and declared the expenses illegally incurred, rendering the transaction void.

Arguments of the Parties

Appellant (South Barrackpore Municipality)

The lease was ultra vires the Municipality.
The lease binds only the executing persons and not the Municipal Commissioners who represent the rate-payers.
The contract was entered into in fraud of the Bengal Municipal Act.
The lease was not duly executed in accordance with the provisions referred to in the Municipal Act (the plaint invokes Section 87; the court analyzes what it describes as Section 37's formal requirements).
The Commissioners had no power to make such a contract without budgeting for the expenditure and obtaining sanction from superior authorities.
The defendant had only a temporary or occupancy right and therefore could not convey a permanent right.
The higher authorities refused to sanction the expenses and declared them illegally incurred, which should render the transaction void.
The plaint also alleged fraud by the defendant in representing that he had a permanent right and praying for cancellation of the lease and refund of moneys expended (paras and particulars are cited in the opinion).

Respondent (Amulya Nath Chatterjee)

The respondent contended that the formal requirements said to be prescribed by Section 37 do not apply to leases or counterparts of leases, but only to contracts for execution of municipal works; he relied on the language of Section 34 to support that position (i.e., that Commissioners may purchase or take a lease of land for purposes of the Act).
The respondent argued that, whether valid or not, the lease had been ratified by the Commissioners' subsequent conduct: they entered into possession, sublet parts, permitted certain uses (carcass disposal, burying ground), and otherwise acted under the lease.
The respondent's counsel argued that a plea of fraud of the nature alleged had not been specifically raised in the plaint (the court examines the plaint and disputes that contention).
The respondent apparently admitted (as recorded by the court) that the kabuliyat was not duly executed in accordance with the provisions described by the court (see the court's statement that the respondent admitted the execution defect).

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis proceeds through the appellant's grounds in sequence and applies statutory construction and factual assessment based on the record supplied to it.

1. Ultra vires and binding nature: The court rejected the contention that the lease was ultra vires. It held that taking a lease for the purpose of using the land as a trenching ground was within the Municipality's powers, and the court was not shown any clause in the Municipal Act prohibiting such a lease. Accordingly the lease was not invalid on the ground that it bound only the executing parties and not the Municipal Commissioners.

2. Formal execution requirements (Section(s) of the Municipal Act): The appellant had argued the lease was not duly executed under what the plaint invoked as "Section 87" of the Municipal Act; the opinion expounds the formal requirements that it attributes to "Section 37" — namely, that any contract on behalf of Commissioners involving a value exceeding Rs. 500 must be sanctioned at a meeting, be in writing, be signed by at least two Commissioners (one being the Chairman or Vice-Chairman), and be sealed with the common seal; unless so executed such contract shall not bind the Commissioners.

Applying that provision, the court found no doubt that the transaction involved a value exceeding Rs. 500 (the salami Rs. 357-8 annas plus one year's rent calculated at Rs. 429 exceeded Rs. 500). The court accepted that the kabuliyat was not executed in the formal manner required: it was signed only by the Chairman (two Commissioners witnessed but did not sign as contracting parties) and it was not sealed with the common seal. The court therefore concluded that, under the last clause of the provision, the contract was not binding on the Commissioners.

3. Applicability of the formalities to leases: The respondent argued (relying on Section 34) that the formalities did not apply to leases. The court rejected that narrow view, holding that Section 34 (authorising purchase or taking a lease) must be read together with the section prescribing execution formalities (which the court designates Section 37). The court read Section 37 as applying to all contracts which involve a value exceeding Rs. 500 and therefore held that the formal execution requirements did apply to the lease.

4. Ratification by conduct: The court considered the respondent's argument that the Commissioners' subsequent conduct constituted ratification. It noted that the Commissioners did attempt to enter into possession, sublet a few cottahs, let part for carcass disposal, and used part as a burying ground; but tenants resisted and two tenants sued and ejected the Municipality from some of the land. The court viewed these events as circumstances that justified the Municipality in seeking cancellation rather than demonstrating effective, irrefutable ratification.

5. Budgeting and sanction of expenses: The court examined the contention that the lease was invalid because the expenditure had not been budgeted and sanctioned by higher authorities. It found no provision in the Act requiring such prior budgeting or sanction and therefore did not accept this ground as rendering the lease invalid.

6. Defendant's title and alleged fraud: The court accepted the appellant's contention that the defendant had only a temporary/occupancy right and could not convey a permanent right. It examined the lease's language (which purported to grant permanent possession and broad uses) and compared it with the defendant's title deed (production cited in the record). The title deed showed that the defendant had purchased a "mourasi mokurrari ganti jama" (apparently an agricultural/occupancy right) and evidence showed tenants in occupation and subsequent successful ejectment suits by at least two tenants. Further, the zemindar served notice forbidding the use of the land as a trenching ground and pointed out the defendant's lack of permanent title; the rent was noted to be excessive. On these facts the court concluded the defendant must have known he had no right to convey permanent khas possession and that his conduct amounted to fraud.

7. Pleading of fraud: The court addressed the respondent's submission that fraud had not been properly pleaded. The court found that the plaint did allege that the defendant had no permanent right and that his representation was fraudulent (paras 11 and 12), that the plaint specifically prayed that the lease be cancelled as illegal and fraudulent (para 14(a)), and sought refund and pecuniary relief with particulars of expenditures and payments made in connection with resisting ejectment suits. The issue of fraudulent conduct had also been framed by the Subordinate Judge as one of the issues. On that basis the court held it was not precluded from deciding the case on grounds of fraud.

8. Disposition of grounds: Although the court found the formal execution defect (the Section 37 issue) sufficient to conclude the lease was not binding, it expressly stated it did not rest the decision solely on that ground and relied also on the defendant's lack of title and fraudulent conduct to set aside the lease.

Holding and Implications

Holding: The appeal was allowed and the lease (and the decree of the lower Court dismissing the Municipality's suit) was set aside. The court decreed the appeal as prayed by the Municipality and ordered that this decision carry costs in both Courts.

Implications:

Direct effect on the parties: The lease is declared not binding and is set aside; the lower court's dismissal of the Municipality's suit is reversed. Costs are awarded against the respondent in both Courts.
Basis of the decision: The court's order rests on multiple grounds explicitly considered in the opinion — (a) the lease was not duly executed according to the formal execution provision the court describes (contracts exceeding Rs. 500 required meeting sanction, signatures of two Commissioners including Chairman or Vice-Chairman, and the common seal), and (b) the defendant lacked the permanent title he purported to convey and was guilty of fraud in granting permanent possession and rights which he could not legitimately confer.
No broader precedent was announced beyond application of the municipal statutory formalities and the established principles concerning lack of title and fraud; the opinion does not cite earlier case law as binding precedent.

This summary is based exclusively on the text of the provided opinion and does not introduce information beyond what appears in that opinion.

Show all summary ...

and Sharfuddin, J.

1. This is an appeal against a decision of the Subordinate Judge, Second Court, Alipore, dated the 13th June 1905.

2. The appeal arises out of a suit brought by the South Barrackpore Municipality against the defendant Amulya Nath Chatterjee to set aside a permanent maurasi mokurrari lease granted on the 22nd March 1902 by the latter to the former in respect of 35 bighas, 15 cottahs of land. The Municipality had to pay a salami of Rs. 357 8 annas to the defendant and the rent reserved was one rupee per bigha per month. The Municipality in this suit prayed for cancellation of this lease; but the suit was dismissed by the Subordinate Judge.

3. The Municipality now appeal, and on their behalf it is contended, first, that the lease entered into by them with the defendant was ultra vires; secondly, that it binds the executing persons, but not the rate-payers; thirdly, that it is a contract entered into in fraud of the Bengal Municipal Act fourthly, that it was not duly executed; fifthly, that it was illegal, because the Commissioners had no power to enter into any such contract without budgetting for it and obtaining the sanction of the higher Authorities; sixthly, that the defendant had no permanent right to convey to the Municipality, but only a temporary right; and seventhly that the higher authorities refused to sanction the expenses incurred in the transaction and declared all such expenses to have been illegally incurred and the transaction void.

4. In our opinion the first of these grounds of appeal cannot be sustained. The lease was taken by the Municipality for the purpose of using the land to which it related as a trenching ground, and it does not appear to us that to enter into such a lease is beyond the powers of the Municipality. The lease therefore was not invalid on this ground and does not seem to us to be one which binds only the executing parties and not the Municipal Commissioners who represent the rate-pavers. Then we have not been shown any clause in the Municipal Act, which prohibits the execution of such a lease.

5. The fourth contention of the learned Counsel for the plaintiff-appellant is that the lease has not been duly executed in accordance with the provisions of Section 87 of the Municipal Act. That section lays down that "The Commissioners may enter into and perform any contract necessary for the purposes of this Act." But it goes on to say:--"Every contract made on behalf of the Commissioners of a Municipality in respect of any sum exceeding five hundred rupees or which shall involve a value exceeding five hundred rupees, shall be sanctioned by the Commissioners at a meeting and shall he in writing and signed by at least two Commissioners, one of whom shall be the Chairman or Vice-Chairman, and shall be sealed with the common seal of the Commissioners." And the section winds up by saying:--"Unless so executed such contract shall not be binding on the Commissioners."

6. Now, there can be no doubt that the execution of the present contract was sanctioned by the Commissioners at a meeting and that it involves a value exceeding Rs. 500. The amount of the salami, the payment of which was stipulated for in the lease was Rs. 357 8 annas. The amount of rent agreed to be paid for the 35 bighas 15 cottahs was Rs. 429 per annum. So that even one year's value of this contract constituted a value exceeding Rs. 500 and therefore the contract comes within the provisions of section 37 of the Act. That being so, it must be admitted, as it is admitted by the respondent that the kabuliyat executed on behalf of the Municipality was not duly executed in accordance with the provisions of section 37, because it was signed only by the Chairman and although two of the Commissioners witnessed it they did not sign it as contracting parties. Furthermore, it was not sealed with the common seal of the Commissioners. Hence, it would seem that under the last clause of Section 37, the contract is not binding on the Commissioners.

7. The learned pleader for the defendant-respondent, however, contends that the provisions of section 37 do not apply to leases or counterparts of leases, but merely to contracts executed on behalf of the Municipality for the execution of Municipal works; and he urges that under Section 34

"the Commissioners at a meeting may purchase or take a lease of any land for the purposes of this Act, and may sell, let, exchange or otherwise dispose of any land not required for such purposes;"

and that, therefore, such a lease, or counterpart of a lease, executed under Section 34 does not require to he executed with all the formalities prescribed by Section 37. We think, however, that this is not the ease. Section 34 in our opinion, must be read along with Section 37. Section 34 refers no doubt to certain clauses of contracts and then Section 37 applies to all contracts, of whatever nature, and provides that if these contracts involve a value exceeding Rs. 500 they shall be executed in accordance with the terms of that section.

8. That being the view we take, we must hold that the lease in this case was not duly executed and is, therefore, not binding on the Commissioners.

9. We do not however find it necessary to rest our decision upon this ground only. There are other grounds on which the contract must be set aside.

10. We may here allude, however, to the further contention of the pleader for the respondent which is to the effect that whether the lease was valid or not, it was ratified by the Commissioners' subsebquent conduct. It is no doubt the case that the Commissioners, after executing the contract, endeavoured to enter into possession of the land which formed the subject of it. They sublet a few cottahs of it. They let a portion of it for the throwing of the carcasses of animals, and used another portion as a burying ground. But, as soon as they did so, they were resisted by the tenants of the land; and they were ejected from some of the land by two tenants suing them. So that it appears that circumstances occurred, after they took possession of the land, which justified the Municipality in praying for the cancellation of the lease.

11. The next contention of the appellant is that the Municipality had no power to enter into this lease without having the expenditure provided for by budget and sanctioned by the superior authorities. We need only say that there is [no provision in the Act to this effect; nor do we think the lease is invalid for this reason.

12. The sixth contention of the learned Counsel for the appellant is that the defendant had only a temporary right in the land and no power, therefore, to convey a permanent right to his client. We think that this plea also is a good one. It is quite clear from the terms of the lease, that the lessor, the defendant, purported to convey to the plaintiff a permanent mourasi mokurrari lease of the land. Then the lease goes on to say:--

"From this day becoming possessor of the land, you shall continne to enjoy and possess the land peaceably by making mehter-depot, trenching ground, preparing bricks and excavating tanks, settling tenants on the said land and using it in any other way you like."

Finally, the lease concludes by saying that the lessor grants this permanent mourasi mokurrari pottah counterpart of the kabuliyat for the land. Now it is evident that the defendant had no such right to convey to the plaintiff. His title deed is produced (see page 79 of the paper-book) and this shows that what he purchased from Bepin Behary Chatterjee on the loth October 1901 was a mourasi mokurrari ganti jama which was, apparently, of an agricultural nature, and what he had apparently (which is shown by the proclamation of sale) was only an occupancy right. Then, it further appears from the evidence that the land was not only of an agricultural nature but was in the occupancy of tenants, and as already observed as soon as the plaintiff endeavoured to take possession of the land and make use of it for the purpose of throwing carcasses and as a burying ground, two of the tenants, at least, resisted the plaintiff, brought suits against him and obtained decrees for ejectment. The defendant had, therefore, no right to convey to the plaintiff khas possession of the land, as he did in the passage of the lease already cited: see page 8 of the paper-book. In these circumstances, as the defendant purported to convey to the plaintiff a permanent lease of the land and khas possession thereof, which he evidently had no right, and must have known he had no right to do, and as the rent, moreover, was very excessive, it may well be held that the defendant has been guilty of fraud. He must have known that there were tenants on the land, and he should not have given the plaintiff khas possession or the right to use it in any way he liked. When he did so, he certainly was guilty of fraud. Furthermore, the zemindar of the land has served notice on the plaintiff forbidding the use of the land as a trenching ground and pointing out that the defendant had no permanent right to convey to the plaintiff, which is further apparent from the fact established by the evidence that the rent of the land had recently been increased. That being so, the action of the defendant was fraudulent, and the lease should be cancelled on this ground.

13. The learned pleader for the respondent urges that no such plea was raised in the plaint nor was fraud of this nature alleged. But in paragraph 11 of the plaint it has been expressly pleaded that the defendant had really no permanent right and therefore could not grant such right to the Corporation, and that his representation that he had a permanent right was fraudulent. Then in paragraph 12 it is said "that the Commissioners of the South Barrackpore Municipality have subsequently in the course of the current year enquired into facts relating to the said lease and have come to know of fraud in the matter." Further, in paragraph 14 (a) the plaintiff prays:--"That the said lease be cancelled and declared illegal, fraudulent, and inoperative." And in Clause (c) of the same paragraph it is prayed, "That the defendant be directed to refund to the said Corporation the moneys paid under the said lease and the sums expended from the Municipal fund in connection with which the said land and that a decree for the recovery of the total amount of Rs. 762-10 annas be passed against the defendant." Then, in the particulars of the plaintiff's pecuniary claim the expenses incurred in defending suits Nos. 772 and 774 of 1902 in the Court of the Second Munsif of Sealdah, instituted by Bepin Behary Das and Upendra Nath Das, that is the tenants who sued the plaintiff for ejectment which expenses amount to Rs. 50, 11 annas, 3 pies have been claimed. The plaintiff further claims Rs. 139, annas 3, 6 pies, paid to Bepin Behary Das and Upendra Nath Das in satisfaction of the decrees in the above mentioned suits; the plaintiff altogether claims Rs. 50, annas 9, 6 pies on this account. The fact, then of the plaintiff having been ejected from the land demised by the defendant has been expressly brought to the notice of the latter in the present suit; and as the plea of fraud has been thus raised in the plaint and as, moreover, the second issue framed by the Subordinate Judge is, "was the defendant guilty of any fraudulent act, if not is the lease liable to be cancelled?" we do not think we are debarred from decreeing this appeal on this ground. We accordingly do so, as prayed, setting aside the decree of the lower Court. This order will carry costs in both the Courts.